Monthly Archives: October 2013

What Impact Will the SFTZ Have on Trade?

As of September 29, 2013, the Shanghai Free Trade Zone is now open for business, but what impact will it have on trade? Opinions are mixed.

CNBC states that the Shanghai Free Trade Zone is No Match for Hong Kong, even though it is a 28.8 square kilometre district that many hoped would rival Hong Kong. Why? For starters, there will be no special tax treatments while Hong Kong’s 16% personal income tax will continue to retain talent and headquarters of global banks. Secondly, many much-needed* reforms in China, such as reforms on state-owned enterprises, public finance, land ownership, and the Hukou system won’t be part of the FTZ.

KPMG issued a special tax alert when the China (Shanghai) Pilot Free Trade Zone was Officially Launched with their observations. KPMG’s opinion on the zone that was designed to improve investment facilitations to meet international standards, deregulate currency exchange controls, and improve efficiency and flexibility in terms of government regulatory controls and legal environment specification include the following:

  • financial institutions will develop innovative financial services and products to allow China to be more competitive on a global basis once further reforms w.r.t. the convertibility of the RMBi is improved
  • allowed industries will have simplified administrative procedures to provide greater convenience for investors once the filing mechanism is implemented
  • the government may develop preferential policies towards promoted industries
  • breakthrough reforms are required in terms of foreign exchange control

In other words, they expect that, in time the zone, for preferred industries, will simplify and enhance trade while providing companies access to new, and innovative, financial services. However, for now, the benefits are limited.

Time, said that Shanghai has a Free-Trade Zone, so Now What?, noting that there is great concern among Chinese policymakers about opening the inexperienced domestic financial sector too quickly to the global marketplace. As a result, it is therefore hard to gauge at this point how far and how fast the Shanghai free-trade zone will be allowed to develop, and there’s even more uncertainty about when any reforms attempted there will be introduced on a wider scale. In addition, many analysts expect the reforms to come slowly and have doubts about how readily they could be applied to China as a whole.

Conclusion, the zone has great potential, but at the present time, it’s not likely to take off too fast until the reforms are decided and made known. Any differing opinions?


* In the opinions of some.

Does Gen-X Rule?

Well, if we are talking about the Billy Idol led band Generation X, I think we can all agree that they most definitely rule as Ready Steady Go* is still a punk rock anthem 25 years later!

But if we are talking about the post-boomer, pre-millennial generation, it’s a harder question to answer, but if you look at the recent Generation Gap survey from E&Y (as summarized on The Economist), we’re the most entrepreneurial, the easiest to work with, the best team players, and the best problem solvers — taking 4 out of the 6 rankings. In addition, we’re almost as hard working as the baby boomers and the second most cost-effective employees. From a statistical point of view, we beat out the boomers and trounce Gen-Y. Now, we’re not going to say the E&Y study is conclusive, but it’s suggestive.

Which leads the doctor to ask, does your supply chain have Gen-X at its core?


*Starts at the 1:08 mark.

H.R. 2775, By the Numbers

Now that H.R. 2775 has passed, the US Government is back to work, for now. (The deal only funds the government until January 15, 2014 and only raises the debt ceiling until February 7, 2014, so Americans face the possibility of another government shutdown early next year.) But what does H.R. 2775 really mean? It means that the government may spend “such amounts as may be necessary, at a rate
for operations as provided in the applicable appropriations Acts
for fiscal year 2013 and under the authority and conditions provided
in such Acts, for continuing projects or activities (including the
costs of direct loans and loan guarantees) that are not otherwise
specifically provided for in this joint resolution, that were conducted
in fiscal year 2013, and for which appropriations, funds, or other
authority were made available in the following appropriations Acts.

And what was specifically provided for in the joint resolution that was H.R. 2775? Not much. While the bill is 14 pages, there are only 18 specific numbers specified. Specifically, in decreasing order of magnitude, it allocates the following 10 amounts:

$9.248418 B for the “Department of Transportation – Federal Aviation Administration – Operations”

$4.821181 B for “The Judiciary – Courts of Appeals, District Courts, and Other Judicial Services – Salaries and Expenses” (and at most 25M shall be available for transfer between accounts to maintain minimum operating levels)

$2.455490 B for the “Department of Veterans Affairs – Departmental Administration – General Operating Expenses Veterans Benefits Administration”

$1.012 B for “The Judiciary – Courts of Appeals, District Courts, and Other Judicial Services – Defender Services”

$600 M for the “Department of Agriculture – Forest Service – Wildland Fire Management” for urgent wild land fire suppression activities

$273 M to meet the terms of section 251(b)(2)(B)(ii)(III) of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended. and $469.369 M in additional new budget authority pursuant to 251(b)(2)(B) of such act from the amounts made available for “Social Security Administration, Limitation on Administrative Expenses”

$186 M for the “Maritime Administration – Maritime Security Program”

$36 M for the “Department of the Interior – Department-wide Programs – Wildland Fire Management” for urgent wild land fire suppression activities (with $15 M earmarked for burned area rehabilitation)

$3.1 M for the “Privacy and Civil Liberties Oversight Board”

$174 K payment to Bonnie Englebardt Lautenberg, widow of late New Jersey Senator Frank R. Lautenberg

And it sets the following three limits:

Amends Public Law 100-676 to $2.918 B from 775 M

Limits the amounts made available to carry out section 125 of title 23, United States Code, under Chapter 9 of Title X of Division A of the Disaster Relief Appropriations Act, 2013 (Public Law 113-2; 127 Stat. 34) to $450 M

Amends Division F of Public Law 112-74 to may retain up to $1.499M instead of $2.499 M

So what does this mean?

Given that it only (re)sets funding levels for about 0.5% of the annual budget (18B of 3.8T), it means its business as usual until the Republicans decide to holde the senate hostage again in January over the Patient Protection and Affordable Care Act.

The real impact is the 17 days of Government shutdown that preceded it and the detrimental effects it had on your (global) supply chain(s).

MAP-21 is in Effect. Are You Compliant? Part II

In Part I, we noted that MAP-21, or the Moving Ahead for Progress in the 21st Century Act (1.3MB PDF), took effect on October 1, outlined some key sections of interest, and asked if your Supply Chain was compliant?

Today we are going to outline some of the key provisions that you should be aware of if you are not already.

Motor Vehicle and Highway Safety Improvement Act: Subtitle B

  • 31206
    Amends Chapter 327 of title 49 of the United States Code to increase the penalty amounts by a factor of 5 to 10, depending on the offence.
  • 31207
    A person
    may not sell, offer for sale, introduce or deliver for introduction
    in interstate commerce, or import into the United States any motor
    vehicle or motor vehicle equipment if the vehicle or equipment
    contains a defect related to motor vehicle safety about which notice
    was given.
  • 31208
    manufacturer (including an
    importer) offering a motor vehicle or motor vehicle equipment for
    import shall provide, upon request, such information that is necessary
    to identify and track the products, including (1) the product name and manufacturer address and (2) each retailer or distributor to which the manufacturer directly supplied motor vehicles or motor vehicle equipment.
  • 31209
    Amends section 30166(c) of title 49 of the United States Code to require entry into a memorandum of understanding with
    the Secretary of Homeland Security for inspections and sampling
    of motor vehicle equipment being offered for import to
    determine compliance with this chapter or a regulation or order
    issued under this chapter    .

Motor Vehicle and Highway Safety Improvement Act: Subtitle C

  • 31307
    No motor vehicle manufacturer,
    part supplier, or dealership may discharge an employee or
    otherwise discriminate against an employee with respect to compensation,
    terms, conditions, or privileges of employment because the employee (or any person acting pursuant to a request of the
    employee) —

    1. provided, caused to be provided, or is about to provide
      (with any knowledge of the employer) or cause to be provided
      to the employer or the Secretary of Transportation information
      relating to any motor vehicle defect, noncompliance, or any
      violation or alleged violation of any notification or reporting
      requirement of this chapter;
    2. has filed, caused to be filed, or is about to file (with
      any knowledge of the employer) or cause to be filed a proceeding
      relating to any violation or alleged violation of any motor vehicle
      defect, noncompliance, or any violation or alleged violation of
      any notification or reporting requirement of this chapter;
    3. testified or is about to testify in such a proceeding;
    4. assisted or participated or is about to assist or participate
      in such a proceeding; or
    5. objected to, or refused to participate in, any activity
      that the employee reasonably believed to be in violation of
      any provision of chapter 301 of this title, or any order, rule,
      regulation, standard, or ban under such provision.

Commercial Motor Vehicle Safety Enhancement Act: Subtitle A

  • 32107
    The Secretary shall require a registrant
    to update its registration under this section not later than
    30 days after a change in the registrant’s address, other contact
    information, officers, process agent, or other essential information,
    as determined by the Secretary    .
  • 32109
    The Secretary
    shall revoke the registration of a motor carrier if the Secretary
    finds that the carrier is or was conducting unsafe operations
    that are or were an imminent hazard to public health or property    .
  • 32110
    The Secretary may withhold, suspend, amend, or revoke any
    part of the registration of a person required to register under
    chapter 139 for failing to obey a subpoena or requirement of the Secretary under this chapter to appear and testify or produce
    records    .

Commercial Motor Vehicle Safety Enhancement Act: Subtitle B

  • 32203
    The State shall report a conviction of a foreign
    commercial driver by that State to the Federal Convictions
    and Withdrawal Database    .
  • 32204
    Updates section 31310 to state that a foreign commercial
    driver shall be subject to disqualification under this section    .

Commercial Motor Vehicle Safety Enhancement Act: Subtitle C

  • 32302
    The Secretary has one year to establish a national registry of medical examiners in accordance with section 31149(d)(1)
    of title 49, United States Code and develop requirements for a medical examiner to be
    listed in the national registry.
  • 32304
    The Secretary has one year to issue final regulations minimum entry-level training requirements for an individual
    operating a commercial motor vehicle.

Commercial Motor Vehicle Safety Enhancement Act: Subtitle E

  • 32504
    The Secretary may enforce an imminent hazard out-of-service order by towing and impounding a commercial motor vehicle until the order is rescinded.
  • 32505
    Penalties are increased by a factor of 3.5 to 20, depending on the penalty.

Commercial Motor Vehicle Safety Enhancement Act: Subtitle I

  • 32915
    A motor carrier
    may not broker transportation services unless the motor carrier
    has registered as a broker under this chapter.
  • 32915
    A motor carrier registered under this chapter may only provide transportation of property with
    (A) self-propelled motor vehicles owned or leased by
    the motor carrier; or
    (B) interchanges under regulations issued by the Secretary
    if the originating carrier
      (i) physically transports the cargo at some point;
    and
      (ii) retains liability for the cargo and for payment
    of interchanged carriers …
  • 32918
    Each broker subject
    to the requirements of this section shall provide financial security
    of $75,000 for purposes of this subsection, regardless of
    the number of branch offices or sales agents of the broker    .
  • 32921
    Requires that a carrier demonstrates, before being registered, through
    successful completion of a proficiency examination established
    by the Secretary, knowledge and intent to comply
    with applicable Federal laws relating to consumer protection,
    estimating, consumers’ rights and responsibilities, and
    options for limitations of liability for loss and damage    .

Hazardous Materials Transportation Safety Improvement Act

  • 33010
    Increases already large civil penalties by 50% to 75%.

Again SI would like to state that this isn’t an exhaustive list of items that you need to be aware of as a broker or carrier, but just a starting one. If you are a freight broker or carrier and someone on your staff hasn’t at least scanned this end-to-end, it would probably be a good idea, especially considering all of the increased penalties for non-compliance.